Why LIC is in talks with RBI and SEBI
What's the story
The Life Insurance Corporation of India (LIC) is in talks with key financial regulators, including the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). The discussions are aimed at expanding long-term investment options to match the growing liabilities from its annuity products. LIC's CEO R Doraiswamy said this in an interview with PTI.
Investment strategy
Need for long-term investments
Annuity products convert a retirement corpus into a regular pension for life. As more policyholders favor these products, the need for long-term investments to match such liabilities has increased. Doraiswamy said LIC is in touch with SEBI and RBI to communicate its requirements clearly. He also noted that the Insurance Regulatory and Development Authority of India (IRDAI) is taking proactive steps to meet market needs.
Financial impact
Aligning regulations
Doraiswamy emphasized that insurance companies generate long-term funds, which are used to meet long-term financing needs such as infrastructure development. He said the regulations are being aligned with these requirements, creating a win-win situation for both parties. LIC's annuity business has a very long tail, with liabilities extending up to 30-50 years. The investment of funds is based on this underlying business.
Business performance
Focus on improving VNB margin
When asked if LIC could maintain a high net Value of New Business (VNB) margin of over 20% in FY27, Doraiswamy said the corporation is focused on improving the VNB margin and performance across all parameters. He stressed that their primary focus is to provide good value to customers through products that they keep adopting and subscribing to. This will improve margins by increasing ticket size, volume, and efficiency.
Digital expansion
Fintech arm in the works
Doraiswamy also revealed that LIC is considering setting up a fintech arm either through strategic investment or organically to meet its growing digital needs. He said they are engaging with both fintech and insurtech players to bring innovation. On strategic investments, he said as a big financial institution investing in multiple organizations, they look at specialized players as a way of improving returns on policyholders' funds.